Aishwari Gupta, global head of payments and RWA at Polygon, said the digital asset industry is in a “supercycle” and could see more than 100,000 stablecoin issuers emerge in the next five years.
His predictions follow governments, banks, and businesses reevaluating the role of tokenized money and its ability to shape capital allocation, payment processes and the flow of funds between countries.
Banks grapple with changes in liquidity as tablecoin adoption grows
Mr. Gupta cited developments in Japan as evidence that digital tokens can be used in formal economic systems without undermining the power of financial authorities. Japan has shown that by using stablecoins like JPYC to buy government bonds and distribute economic stimulus, central banks can use traditional macroeconomic tools such as interest rate adjustments to maintain control of the situation.
Mr. Gupta said these mechanisms continue to influence the behavior of stablecoins in the same way they influence national currencies.
However, a predicted surge in new issuers poses challenges to a banking model based on cheap deposits. The yields offered in digital asset markets are attracting funds from traditional accounts, raising funding costs for banks, which is limiting their ability to extend credit, Mr. Gupta said. He said the change was related to structural pressure points that are intensifying as more stablecoins enter circulation.
In response, Mr. Gupta envisions expanding deposit token applications that would allow customers to operate in the digital space without withdrawing real money from financial institutions. He mentioned a system developed by JPMorgan that allows deposit tokens to be borrowed and used elsewhere. On the other hand, the actual balance remains under the bank’s control, thus maintaining balance sheet stability without interfering with blockchain-based transactions.
Neutral settlements are expected to manage a high degree of fragmentation.
Mr. Gupta predicted that there would be failures as tens of thousands of stablecoins are expected. He identified a neutral payment layer as the most likely way to link multiple tokens, allowing payments if the sender uses one stablecoin and the receiver uses another.
This method is similar to current payment network infrastructure, where complexity is hidden from consumers.
Enterprise adoption increases as infrastructure matures
Standard Chartered’s recent analysis We support the view that stablecoins are becoming increasingly integrated into mainstream financial activities. The bank reported that businesses are increasingly using dollar-linked tokens in financial management, cross-border payments, currency hedging, and accessing US dollar-equivalent liquidity.
It introduced a partnership between StraitsX, Ant International, and Grab scheduled for 2024. The partnership will leverage a regulated Singapore dollar stablecoin to enable merchants to receive instant payments regardless of the customer’s currency.
The bank also noted that stablecoins are becoming more popular in parts of the world where currencies are volatile, with businesses and individuals using them as alternative stores of value. Standard Chartered said ongoing regulatory discussions and revised accounting guidelines are further increasing the involvement of organizations as companies seek to improve efficiency through blockchain-based payments.
The bank said that with stronger infrastructure in place, companies are increasingly looking for ways to integrate stablecoins into their payment processes and financial systems, especially in areas where traditional cross-border systems are slow or costly.
